QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended September 30, 2009
Commission file number 1-5805

JPMORGAN CHASE & CO.

(Exact name of registrant as specified in its charter)

Delaware

13-2624428

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

270 Park Avenue, New York, New York

10017

(Address of principal executive offices)

(Zip Code)

Registrants telephone number, including area code (212) 270-6000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

þYes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).

þYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filerþ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).

oYes þ No

Number
of shares of common stock outstanding as of October 31, 2009:
3,940,654,134

Pre-provision profit is total net revenue less noninterest expense. The Firm believes
that this financial measure is useful in assessing the ability of a lending institution to
generate income in excess of its provision for credit losses.

(b)

The third and fourth quarters of 2008 included an accounting conformity loan loss reserve
provision related to the acquisition of Washington Mutuals banking operations.

(c)

The income tax benefit in the third quarter of 2008 included the realization of a benefit
from the release of deferred tax liabilities associated with the undistributed earnings of
certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely.

(d)

JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion.
The fair value of the net assets acquired exceeded the purchase price, which resulted in
negative goodwill. In accordance with accounting principles generally accepted in the United
States of America (U.S. GAAP) for business combinations, nonfinancial assets that are not
held-for-sale were written down against that negative goodwill. The negative goodwill that
remained after writing down nonfinancial assets was recognized as an extraordinary gain. As a
result of the final refinement of the purchase price allocation during the third quarter of
2009, the Firm recognized a $76 million increase in the extraordinary gain.

(e)

Effective January 1, 2009, the Firm implemented new FASB guidance for participating
securities. Accordingly, prior-period amounts have been revised as required. For further
discussion of the guidance, see Note 21 on pages 166-167 of this Form 10-Q.

(f)

The calculation of both the second-quarter and nine months ended 2009 earnings per share
includes a one-time, noncash reduction of $1.1 billion, or $0.27 per share, resulting from
repayment of U.S. Troubled Asset Relief Program (TARP) preferred capital. For further
discussion, see Impact on diluted earnings per share of redemption of TARP preferred stock
issued to the U.S. Treasury on page 19 of this Form 10-Q.

(g)

On June 5, 2009, the Firm issued 163 million shares of its common stock at $35.25 per share;
and on September 30, 2008, the Firm issued 284 million shares of its common stock at $40.50
per share.

(h)

The principal market for JPMorgan Chases common stock is the New York Stock Exchange.
JPMorgan Chases common stock is also listed and traded on the London Stock Exchange and the
Tokyo Stock Exchange.

(i)

The calculation of second-quarter 2009 net income applicable to common equity includes a
one-time, noncash reduction of $1.1 billion resulting from repayment of TARP preferred
capital. Excluding this reduction, the adjusted ROE and ROTCE were 6% and 10% for the second
quarter of 2009, respectively. For further discussion of adjusted ROE, see Explanation and
reconciliation of the Firms use of non-GAAP financial measures on pages 15-19 of this Form
10-Q.

(j)

For further discussion of ROTCE, a non-GAAP financial measure, see Explanation and
reconciliation of the Firms use of non-GAAP financial measures on pages 15-19 of this Form
10-Q.

(k)

Tier 1 common is calculated as Tier 1 capital less qualifying perpetual preferred stock,
qualifying trust preferred securities and qualifying minority interest in subsidiaries. The
Firm uses the Tier 1 common capital ratio, a non-GAAP financial measure, to assess and compare
the quality and composition of the Firms capital with the capital of other
financial services companies. For further discussion, see Regulatory capital on pages 55-57 of
this Form 10-Q.

(l)

Excludes the impact of home lending purchased credit-impaired loans and loans held by the
Washington Mutual Master Trust. For further discussion, see Allowance for credit losses on
pages 81-84 of this Form 10-Q.

(m)

Common equivalent shares have been excluded from the computation of diluted earnings per
share for the third and fourth quarters of 2008, as the effect on income/(loss) before
extraordinary gain would be antidilutive.

MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This section of the Form 10-Q provides managements discussion and analysis (MD&A) of the
financial condition and results of operations for JPMorgan Chase. See the Glossary of Terms on
pages 178-181 for definitions of terms used throughout this Form 10-Q. The MD&A included in this
Form 10-Q contains statements that are forward-looking within the meaning of the Private Securities
Litigation Reform Act of 1995. Such statements are based on the current beliefs and expectations of
JPMorgan Chases management and are subject to significant risks and uncertainties. These risks and
uncertainties could cause JPMorgan Chases actual results to differ materially from those set forth
in such forward-looking statements. For a discussion of some of these risks and uncertainties, see
Forward-looking Statements on pages 184-185 and Part II, Item 1A: Risk Factors on page 187 of this
Form 10-Q, and JPMorgan Chases Annual Report on Form 10-K for the year ended December 31, 2008, as
filed with the U.S. Securities and Exchange Commission (2008 Annual Report or 2008 Form 10-K),
including Part I, Item 1A: Risk factors.

INTRODUCTION

JPMorgan Chase & Co. (JPMorgan Chase or the Firm), a financial holding company incorporated
under Delaware law in 1968, is a leading global financial services firm and one of the largest
banking institutions in the United States of America (U.S.), with $2.0 trillion in assets, $162.3
billion in stockholders equity and operations in more than 60 countries as of September 30, 2009.
The Firm is a leader in investment banking, financial services for consumers and businesses,
financial transaction processing and asset management. Under the J.P. Morgan and Chase brands, the
Firm serves millions of customers in the U.S. and many of the worlds most prominent corporate,
institutional and government clients.

JPMorgan Chases activities are organized, for management reporting purposes, into six business
segments, as well as Corporate/Private Equity. The Firms wholesale businesses comprise the
Investment Bank, Commercial Banking, Treasury & Securities Services and Asset Management segments.
The Firms consumer businesses comprise the Retail Financial Services and Card Services segments. A
description of the Firms business segments, and the products and services they provide to their
respective client bases, follows.

Investment Bank

J.P. Morgan is one of the worlds leading investment banks, with deep client relationships and
broad product capabilities. The clients of the Investment Bank (IB) are corporations, financial
institutions, governments and institutional investors. The Firm offers a full range of investment
banking products and services in all major capital markets, including advising on corporate
strategy and structure, capital-raising in equity and debt markets, sophisticated risk management,
market-making in cash securities and derivative instruments, prime brokerage and research. IB also
selectively commits the Firms own capital to principal investing and trading activities.

Retail Financial Services

Retail Financial Services (RFS), which includes the Retail Banking and Consumer Lending reporting
segments, serves consumers and businesses through personal service at bank branches and through
ATMs, online banking and telephone banking, as well as through auto dealerships and school
financial-aid offices. Customers can use more than 5,100 bank branches (third-largest nationally)
and 15,000 ATMs (second-largest nationally), as well as online and mobile banking around the clock.
More than 22,400 branch salespeople assist customers with checking and savings accounts, mortgages,
home equity and business loans, and investments across a 23-state footprint from New York and
Florida to California. Consumers also can obtain loans through 15,900 auto dealerships and nearly
2,400 schools and universities nationwide.

Card Services

Chase Card Services (CS) is one of the nations largest credit card issuers, with more than 146
million cards in circulation and more than $165 billion in managed loans. In the nine months ended
September 30, 2009, customers used Chase cards to meet more than $241 billion worth of their
spending needs. Chase has a market leadership position in building loyalty and rewards programs
with many of the worlds most respected brands and through its proprietary products, including the
Chase Freedom program.

Through Chase Paymentech Solutions, its merchant acquiring business, Chase is one of the leading
processors of MasterCard and Visa payments.

Commercial Banking (CB) serves more than 26,000 clients nationally, including corporations,
municipalities, financial institutions and not-for-profit entities with annual revenue generally
ranging from $10 million to $2 billion, and approximately 30,000 real estate investors/owners.
Delivering extensive industry knowledge, local expertise and dedicated service, CB partners with
the Firms other businesses to provide comprehensive solutions, including lending, treasury
services, investment banking and asset management to meet its clients domestic and international
financial needs.

Treasury & Securities Services

Treasury & Securities Services (TSS) is a global leader in transaction, investment and
information services. TSS is one of the worlds largest cash management providers and a leading
global custodian. Treasury Services (TS) provides cash management, trade, wholesale card and
liquidity products and services to small and mid-sized companies, multinational corporations,
financial institutions and government entities. TS partners with the Commercial Banking, Retail
Financial Services and Asset Management businesses to serve clients firmwide. As a result, certain
TS revenue is included in other segments results. Worldwide Securities Services holds, values,
clears and services securities, cash and alternative investments for investors and broker-dealers,
and it manages depositary receipt programs globally.

Asset Management

Asset Management (AM), with assets under supervision of $1.7 trillion, is a global leader in
investment and wealth management. AM clients include institutions, retail investors and
high-net-worth individuals in every major market throughout the world. AM offers global investment
management in equities, fixed income, real estate, hedge funds, private equity and liquidity
products, including money-market instruments and bank deposits. AM also provides trust and estate,
banking and brokerage services to high-net-worth clients, and retirement services for corporations
and individuals. The majority of AMs client assets are in actively managed portfolios.

This overview of managements discussion and analysis highlights selected information and may not

contain all of the information that is important to readers of this Form 10-Q. For a complete
description of events, trends and uncertainties, as well as the capital, liquidity, credit and
market risks, and the critical accounting estimates affecting the Firm and its various lines of
business, this Form 10-Q should be read in its entirety.

Financial performance of JPMorgan Chase

Three months ended September 30,

Nine months ended September 30,

(in millions, except per share data and ratios)

2009

2008

Change

2009

2008

Change

Selected income statement data

Total net revenue

$

26,622

$

14,737

81

%

$

77,270

$

50,026

54

%

Total noninterest expense

13,455

11,137

21

40,348

32,245

25

Pre-provision profit

13,167

3,600

266

36,922

17,781

108

Provision for credit losses(a)

8,104

5,787

40

24,731

13,666

81

Income/(loss) before extraordinary gain

3,512

(54

)

NM

8,374

4,322

94

Extraordinary gain(b)

76

581

(87

)

76

581

(87

)

Net income

3,588

527

NM

8,450

4,903

72

Diluted earnings per share(c)(d)

Income/(loss) before extraordinary gain

$

0.80

$

(0.08

)

NM

$

1.50

$

1.13

33

Net income

0.82

0.09

NM

1.51

1.30

16

Return on common equity

Income/(loss) before extraordinary gain

9

%

(1

)%

6

%

4

%

Net income

9

1

6

5

(a)

The third quarter of 2008 included an accounting conformity loan loss reserve provision
related to the acquisition of Washington Mutuals banking operations.

(b)

JPMorgan Chase acquired Washington Mutuals banking operations from the Federal Deposit
Insurance Corporation (FDIC) for $1.9 billion. The fair value of Washington Mutual net
assets acquired exceeded the purchase price, which resulted in negative goodwill. In
accordance with U.S. GAAP for business combinations, nonfinancial assets that are not
held-for-sale were written down against that negative goodwill. The negative goodwill that
remained after writing down nonfinancial assets was recognized as an extraordinary gain. As a
result of the final refinement of the purchase price allocation during the third quarter of
2009, the Firm recognized a $76 million increase in the extraordinary gain.

(c)

Effective January 1, 2009, the Firm implemented new FASB guidance for participating
securities. Accordingly, prior-period amounts have been revised. For further discussion of the
guidance, see Note 21 on pages 166-167 of this Form 10-Q.

(d)

The calculation of EPS for the nine months ended September 30, 2009, includes a one-time
noncash reduction of $1.1 billion, or $0.27 per share, resulting from the redemption of Series
K preferred stock issued to the U.S. Treasury.

Business overview

JPMorgan Chase reported third-quarter 2009 net income of $3.6 billion, compared with net income of
$527 million in the third quarter of 2008. Earnings per share were $0.82, compared with $0.09 in
the prior year. Return on common equity was 9%.

The increase in earnings from the third quarter of 2008 was driven by significantly higher net
revenue, partially offset by an increase in the provision for credit losses and higher noninterest
expense. Both revenue and expense were higher due to the impact of the acquisition of the banking
operations of Washington Mutual Bank (Washington Mutual) on September 25, 2008. In addition, the
increase in net revenue was driven by strong trading results and
gains on legacy leveraged-lending
and mortgage-related positions, compared with markdowns in the prior year in IB; gains on trading positions
and higher net interest income in Corporate/Private Equity; and wider loan spreads across most businesses.
The increase to the provision for credit losses resulted from a significant increase in the
consumer provision, reflecting higher net charge-offs and an increase in the allowance for credit
losses in the home lending and credit card loan portfolios. In addition to the impact of the
Washington Mutual transaction, the increase in noninterest expense was driven by higher
performance-based compensation expense, partially offset by lower headcount-related expense.

Net income for the first nine months of 2009 was $8.5 billion, or $1.51 per share, compared with
$4.9 billion, or $1.30 per share, in the first nine months of 2008. The following factors that
drove the 2009 third-quarter results also generally drove the increase in earnings from the comparable 2008
nine-month period: strong net revenue growth, driven by the
Washington Mutual transaction; higher
principal transactions revenue; and increased net interest income; partially offset by higher credit
costs and higher noninterest expense. The first nine months of 2009 also reflected higher net
revenue from mortgage servicing rights (MSR) risk management results in RFS and higher
noninterest expense resulting from an accrual for an FDIC special assessment in the second quarter
of 2009.

The U.S. and most other economies grew in the third quarter of 2009, with various industry sectors
showing signs of stability. Conditions in financial markets also improved, as evidenced by the
following: credit spreads have stabilized in the interbank term funding markets and
continued to narrow for investment-grade borrowers; credit markets opened for
noninvestment-grade borrowers; and the broader equity markets rose significantly. Activity in the
housing sector increased, with new home construction picking up for the first time in three and a
half years. Consumer spending stabilized, despite losses on household balance
sheets and poor job market conditions, as the unemployment rate rose to 9.8% at the end of the
third quarter. Business capital spending leveled out, aided by a slowing in the pace of inventory
liquidation. Inflation remained low, and the Federal Reserve indicated that the federal funds rate
would likely remain low for an extended period, reiterating its intent to continue to use a wide
range of tools to promote economic recovery and maintain price stability.

JPMorgan Chases line-of-business results for the third quarter of 2009 reflected the broad-based
nature of the economic improvement. Pre-provision profit remained strong at $13.2 billion, up by
$9.6 billion from the prior year. Five of the six lines of business produced revenue growth,
and the Investment Bank, Asset Management, Commercial Banking and the Retail Banking segment within
Retail Financial Services grew net income. In contrast, Card Services and the Consumer Lending
segment within Retail Financial Services reported net losses; in spite of initial signs of
improvement, particularly in early-stage delinquencies, credit costs continued to be elevated in
these businesses. Accordingly, the Firm increased its consumer allowance for credit losses by $2.0
billion, bringing the total allowance for credit losses to $31.5 billion, or 5.28% of total loans.
This addition, combined with capital generation in the quarter, helped the Firm maintain a strong
balance sheet, with a Tier 1 Capital ratio of 10.2% and a Tier 1 Common Capital ratio of 8.2%.

The Firm continued to help consumers and communities navigate the challenging economy by announcing
a revamp of its overdraft policies to provide customers with more control over the fees they pay;
developing new, innovative products in Card Services to enhance the way customers manage their
spending and borrowing; and working with struggling mortgage customers to modify their loans.
JPMorgan Chase has approved more than 262,000 new trial modifications under the U.S. Making Home
Affordable Program and its own modification program, nearly 90% of which include a reduction in
payments for the homeowner. Since 2007, the Firm has helped families by initiating approximately
782,000 actions to prevent foreclosure.

The discussion that follows highlights the current-quarter performance of each business segmentcompared with the prior-year quarter, and presents results on a managed basis unless otherwise
noted. For more information about managed basis, see Explanation and Reconciliation of the Firms
Use of Non-GAAP Financial Measures on pages 15-19 of this Form 10-Q .

Investment Bank net income increased, reflecting higher net revenue partially offset by increases
in both noninterest expense and the provision for credit losses. Fixed Income Markets drove the
revenue growth, with strong results across most products and gains on legacy leveraged-lending and
mortgage-related positions, compared with markdowns on these
positions in the prior year. The increase in the
provision for credit losses reflected deterioration in the credit environment compared with the
third quarter of 2008. Noninterest expense increased, driven by higher performance-based
compensation, partially offset by lower headcount-related expense.

Retail Financial Services net income declined, as an increase in the provision for credit losses
was largely offset by the positive impact of the Washington Mutual transaction. Growth in net
revenue was also driven by higher net mortgage servicing revenue, wider loan spreads and higher
deposit balances, offset partially by lower mortgage production revenue and lower loan balances.
The provision for credit losses rose significantly as weak economic conditions and housing price
declines continued to drive higher estimated losses for the home equity and mortgage loan
portfolios. Included in the third-quarter 2009 addition to the allowance for loan losses was an
increase related to estimated deterioration in the Washington Mutual purchased credit-impaired
portfolio. Noninterest expense increased, reflecting the impact of the Washington Mutual
transaction and higher servicing expense, partially offset by lower mortgage reinsurance losses.

Card Services reported a net loss, compared with net income in the prior year. The decrease was
driven by a higher provision for credit losses, partially offset by higher net revenue. The
increase in net revenue was driven by the impact of the Washington Mutual transaction,
wider loan spreads and higher merchant servicing revenue related to the dissolution of the Chase
Paymentech Solutions joint venture. These benefits were offset partially by higher revenue
reversals associated with higher charge-offs, lower average loan balances and a decreased level of
fees. The provision for credit losses reflected a higher level of charge-offs and an increase in
the allowance for loan losses. Noninterest expense increased due to the dissolution of the Chase
Paymentech Solutions joint venture and the impact of the Washington Mutual transaction.

Commercial
Banking net income increased, driven by higher net revenue,
reflecting the impact of
the Washington Mutual transaction, predominantly offset by a higher provision for credit losses and
higher noninterest expense. Net revenue also increased due to wider loan spreads, a shift to
higher-spread liability products, overall growth in liability balances and higher lending- and
deposit-related fees. These benefits were offset predominantly by spread compression on liability
products and lower loan balances. The increase in the provision for credit losses reflected
continued deterioration in the credit environment across all business segments, particularly real
estate-related segments. Noninterest expense rose due to the impact of the Washington Mutual
transaction and higher FDIC insurance premiums.

Corporate/Private Equity reported net income, compared with a net loss in the prior year,
reflecting continued gains on trading positions, higher net interest income and private equity gains in
the third quarter of 2009, compared with losses in the third quarter of 2008.

Firmwide, the managed provision for credit losses was $9.8 billion, up by $3.1 billion, or 47%,
from the prior year. The prior-year quarter included a $2.0 billion charge to conform Washington
Mutuals allowance for loan losses, which affected both the consumer and wholesale portfolios. For
the purposes of the following analysis, this charge is excluded. The consumer-managed provision for
credit losses was $9.0 billion, compared with $4.3 billion in the prior year, reflecting an
increase in the allowance for credit losses in the home lending and credit card loan portfolios.
Consumer-managed net charge-offs were $7.0 billion, compared with $3.3 billion, resulting in
managed net charge-off rates of 6.29% and 3.39%, respectively. The wholesale provision for credit
losses was $779 million, compared with $398 million, reflecting continued deterioration in the
credit environment. Wholesale net charge-offs were $1.1 billion, compared with $52 million,
resulting in net charge-off rates of 1.93% and 0.10%, respectively. The Firms nonperforming assets
totaled $20.4 billion at September 30, 2009, up from $9.5 billion. The allowance for credit losses
increased by $1.6 billion during the quarter; this resulted in a loan loss coverage ratio at
September 30, 2009, of 5.28%, compared with 5.01% at June 30, 2009, and 2.87% at September 30,
2008. The above mentioned net charge-off rates and allowance for loan loss ratios exclude loans
accounted for at fair value and loans held-for-sale, and the impact of purchased credit-impaired
loans. The allowance for loan loss ratios also excluded the impact of loans held by the Washington
Mutual Master Trust, which were consolidated on the Firms balance sheet at fair value during the
second quarter of 2009 and the $1.1 billion of allowance related to the purchased credit-impaired
portfolio.

Business outlook

The following forward-looking statements are based on the current beliefs and expectations ofJPMorgan Chases management and are subject to significant risks and uncertainties. These risks and
uncertainties could cause the Firms actual results to differ materially from those set forth in
such forward-looking statements.

JPMorgan Chases outlook for the fourth quarter of 2009 should be viewed against the backdrop of
the global and U.S. economies, financial markets activity, the geopolitical environment, the
competitive environment and client activity levels. Each of these linked factors will affect the
performance of the Firm and its lines of business. The Firm continues to monitor the global and
U.S. economic environments. The outlook for the capital markets
remains uncertain, and further
declines in U.S. housing prices in certain markets and increases in
the unemployment rate, either of which could adversely affect the
Firms financial results, are
possible. In addition, as a result of recent market conditions, the U.S. Congress and regulators
have increased their focus on the regulation of financial institutions; any legislation or
regulations that may be adopted as a result could limit or restrict the Firms operations, or
impose additional costs on the Firm in order to comply with such new laws or rules.

Given the potential stress on the consumer from rising unemployment and continued downward pressure on housing
prices, management remains cautious with respect to the credit outlook for the consumer loan portfolios. Possible
continued deterioration in credit trends could result in higher credit costs and require additions to the consumer
allowance for credit losses. Based on managements current economic outlook, quarterly net charge-offs could reach
$1.4 billion for the home equity portfolio, $600 million for the
prime mortgage portfolio and $500 million for the
subprime mortgage portfolio over the next several quarters. The managed net charge-off rate for Card Services
(excluding the Washington Mutual credit card portfolio) could approach 10.5% by the first half of 2010, and thereafter
will remain highly dependent on unemployment levels. The managed net charge-off rate for the Washington Mutual
credit card portfolio could approach 24% over the next several quarters. These charge-off rates are likely to move even
higher if the economic environment deteriorates beyond managements current expectations. Similarly, wholesale credit costs, and net
charge-offs could increase over the next several quarters if the credit environment continues to deteriorate.

The Investment Bank continues to operate in an uncertain environment and, as noted above, results could be adversely
affected if the credit environment deteriorates further. Trading results can be volatile and recent market conditions,
which include elevated client volumes and spread levels, are not likely to continue. As such, management does not
expect recent strong results in both Fixed Income and Equity Markets segments to continue at the same levels. Finally, if
the Firms own credit spreads tighten, as was the case in the third quarter of 2009, the change in fair value of certain
trading liabilities would also negatively affect trading results.

Although management expects underlying growth in Retail Banking, results will be under pressure
from the credit environment and ongoing lower consumer spending levels. In addition, there could be
further declines over the remainder of the year in average retail deposits due to anticipated
downward repricing of certain legacy Washington Mutual deposits. Finally, as a result of recent
changes in the Firms policies relating to non-sufficient funds and overdraft fees, management
expects lower Retail Banking revenue in 2010. Although management estimates are, at this point in
time, preliminary and subject to change, the impact of such changes could result in an
annualized reduction in net income of approximately $500 million.

Card Services faces rising credit costs, as noted above, as well as continued pressure on both
charge volumes and credit card receivables growth, reflecting continued lower levels of consumer
spending. In addition, as a result of the recently-enacted credit
card legislation, management estimates, which are preliminary and
subject to change, are that Card Services
annual net income may be adversely affected by approximately $500 million to $750 million. As a
result of all these factors, management currently expects Card
Services to have a net loss for the full
year 2010.

Commercial Banking results could be negatively affected by rising credit costs, a decline in loan
demand and reduced liability balances.

Earnings in Treasury & Securities Services and Asset Management will be affected by the impact of
market levels on assets under management, supervision and custody. Additionally, earnings in
Treasury & Securities Services could be affected by liability balance flows.

Private Equity results will likely be volatile and continue to be influenced by capital market
activity, market levels, the performance of the broader economy and investment-specific issues. Net
interest income levels will generally trend with the size of the investment portfolio in
Corporate; however, the high level
of trading gains in Corporate in the third quarter of 2009 is not
likely to continue. In the near-term, Corporate quarterly net income (excluding Private Equity, merger-related items
and any significant nonrecurring items) is expected to decline to
approximately $500 million and continue trending lower through
the course of 2010.

Lastly, on a Firmwide matter, the decision of the Firms Board of Directors regarding any increase
in the level of common stock dividends will be subject to their judgment that the likelihood of
another severe economic downturn has sufficiently diminished, and that overall business performance
has stabilized. When, in the Boards judgment, it is appropriate to increase the dividend, the
likely result might involve an initial increase to a $0.75 to $1.00 per share annual payout level,
followed by a subsequent return to the Firms historical dividend payout ratio of 30% to 40% of
normalized earnings over time.

This section provides a comparative discussion of JPMorgan Chases Consolidated Results of
Operations on a reported basis. Factors that relate primarily to a single business segment are
discussed in more detail within that business segment. For a discussion of the Critical Accounting
Estimates Used by the Firm that affect the Consolidated Results of Operations, see pages 92-94 of
this Form 10-Q and pages 107-111 of JPMorgan Chases 2008 Annual Report.

Total net revenue

Three months ended September 30,

Nine months ended September 30,

(in millions)

2009

2008

Change

2009

2008

Change

Investment banking fees

$

1,679

$

1,316

28

%

$

5,171

$

4,144

25

%

Principal transactions

3,860

(2,763

)

NM

8,958

(2,814

)

NM

Lending and deposit-related fees

1,826

1,168

56

5,280

3,312

59

Asset management,
administration and commissions

3,158

3,485

(9

)

9,179

10,709

(14

)

Securities gains

184

424

(57

)

729

1,104

(34

)

Mortgage fees and related income

843

457

84

3,228

1,678

92

Credit card income

1,710

1,771

(3

)

5,266

5,370

(2

)

Other income

625

(115

)

NM

685

1,576

(57

)

Noninterest revenue

13,885

5,743

142

38,496

25,079

53

Net interest income

12,737

8,994

42

38,774

24,947

55

Total net revenue

$

26,622

$

14,737

81

$

77,270

$

50,026

54

Total net revenue for the third quarter of 2009 was $26.6 billion, up by $11.9 billion, or
81%, from the third quarter of 2008. For the first nine months of 2009, total net revenue was $77.3
billion, up by $27.2 billion, or 54%, from the equivalent period of 2008. The increase from both
prior-year periods was driven by higher principal transactions revenue, primarily related to the
strong results across most fixed income and equity products and the absence of markdowns on legacy
leveraged lending and mortgage positions in IB, as well as higher levels of trading gains and
investment securities income in Corporate. The results also benefited from the impact of the
Washington Mutual transaction, which contributed to the increases in net interest income, lending-
and deposit-related fees, mortgage fees and related income. These benefits were offset partially by
reduced fees and commissions resulting from lower market levels on assets under management and
custody. For the year-to-date comparison, an additional driver of the increase in revenue was
higher net revenue from MSR risk management results, offset by the absence of proceeds from the
sale of Visa shares in its initial public offering in the first quarter of 2008.

Investment banking fees for the third quarter and first nine months of 2009 increased from the
comparable periods in 2008, reflecting higher equity and debt underwriting fees, offset partially
by lower advisory fees. For a further discussion of investment banking fees, which are primarily
recorded in IB, see IB segment results on pages 21-24 of this Form 10-Q.

Principal transactions revenue, which consists of revenue from the Firms trading and private
equity investing activities, rose from the third quarter and first nine months of 2008. Trading
revenue increased in the third quarter of 2009, driven by strong results across most fixed income
and equity products; gains of approximately $400 million on legacy leveraged lending and
mortgage-related positions, compared with markdowns of $3.6 billion in the prior year; and gains on
trading positions in Corporate, compared with losses in the prior year of $1.0 billion on markdowns
of Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation
(Freddie Mac) preferred securities. These benefits were offset partially by an aggregate loss of
$1.0 billion in the quarter from the tightening of the Firms credit spread on certain structured
liabilities and derivatives, compared with gains of $956 million in the prior year from the
widening of the spread on those liabilities. For the first nine months of 2009, trading revenue
rose as a result of the same drivers in the quarter, including significantly lower net markdowns on
legacy leveraged lending and mortgage-related positions, compared with markdowns of $7.7 billion in
the prior year; these benefits were offset partially by an aggregate loss of $1.9 billion from the
tightening of the Firms credit spread on certain structured liabilities and derivatives, compared
with gains of $2.8 billion in the prior year from the widening of spreads on those liabilities. The
Firms private equity investments generated net gains in the third quarter of 2009, compared with
net losses in the prior year. For the first nine months of 2009, the private equity investments
produced net losses, compared with net gains in the prior year. For a further discussion of
principal transactions revenue, see IB and Corporate/Private Equity segment results on pages 21-24
and 47-49 respectively, and Note 3 on pages 106-121 of this Form 10-Q.

Lending- and deposit-related fees rose from the third quarter and first nine months of 2008,
predominantly reflecting the impact of the Washington Mutual transaction and organic growth in both
lending- and deposit-related fees in RFS and IB, as well as in CB. For a further discussion of
lending- and deposit-related fees, which are mostly recorded in RFS, CB and TSS, see the RFS
segment results on pages 25-32, the CB segment results on pages 37-39, and the TSS segment results
on pages 40-43 of this Form 10-Q.

The decline in asset management, administration and commissions revenue compared with the third
quarter of 2008 reflected lower brokerage commissions revenue in IB, predominantly related to lower
transaction volume; lower asset management fees in AM, from the impact of lower market levels on
assets under management; and lower administration fees in TSS, driven by the effect of market
depreciation on certain custody assets and lower securities lending balances. For the first nine
months of 2009, the decline was largely due to lower asset management fees in AM from the impact of
lower market levels on assets under management. Lower brokerage commissions revenue in IB and lower
administrative fees in TSS also contributed to the decrease.

The decrease in securities gains compared with the third quarter of 2008 was due to lower gains
from the repositioning of the Corporate investment securities portfolio, in connection with
managing the Firms structural interest rate risk. For the first nine months of 2009, the decrease
reflected lower gains from the sale of MasterCard shares, which totaled $241 million in 2009,
compared with $668 million in 2008. For a further discussion of securities gains, which are mostly
recorded in the Firms Corporate business, see the Corporate/Private Equity segment discussion on
pages 47-49 of this Form 10-Q.

Mortgage fees and related income increased during the third quarter and first nine months of 2009,
as higher net mortgage servicing revenue was offset partially by a production-related net loss in
the third quarter of 2009. The increase in net mortgage servicing revenue was driven by growth in
average third-party loans serviced as a result of the Washington Mutual transaction and higher MSR
risk management results, reflecting primarily, for the nine-month period, the positive impact of a
decrease in estimated future mortgage prepayments and positive hedging results. Mortgage production
generated a net loss for the third quarter of 2009, and a decline from the first nine months of
2008, reflecting an increase in reserves for the repurchase of previously-sold loans, offset by
wider margins on new originations. For a discussion of mortgage fees and related income, which is
recorded primarily in RFS Consumer Lending business, see the Consumer Lending discussion on pages
29-32 of this Form 10-Q.

Credit card income, which includes the impact of the Washington Mutual transaction, was flat
compared with the third quarter and first nine months of 2008, as lower servicing fees earned in
connection with CS securitization activities, largely as a result of
higher credit losses, were
offset by wider loan margins on securitized credit card loans. Also partially offsetting the
decline were higher merchant servicing revenue related to the dissolution of the Chase Paymentech
Solutions joint venture and higher interchange income. For a further discussion of credit card
income, see the CS segment results on pages 33-36 of this Form 10-Q.

Other income increased in the third quarter of 2009 due to the absence of a $375 million charge
recognized in the third quarter of 2008 related to the repurchase of auction-rate securities at
par. Also contributing to the increase in other income during the quarter were higher markups on
certain investments, including seed capital in AM, and higher gains on the sale of certain assets,
including other real estate owned. For the first nine months of 2009, other income decreased, due
predominantly to the absence of $1.5 billion in proceeds from the sale of Visa shares in the first
quarter of 2008 during its initial public offering, lower net securitization income in CS and the
dissolution of the Chase Paymentech Solutions joint venture. These items were partially offset by
the absence of a $423 million loss incurred in the second quarter of 2008, reflecting the Firms
49.4% share in Bear Stearns losses from April 8 to May 30, 2008, and the same items that drove the
increase in the third quarter of 2009 results compared with the third quarter of 2008.

Net interest income increased $3.7 billion to $12.7 billion, and $13.8 billion to $38.8 billion,
for the third quarter and first nine months of 2009, respectively, compared with the comparable
periods in 2008. The increase from the prior year was driven by the Washington Mutual transaction,
which contributed to higher average loans and deposits, and the impact of a wider net interest
margin. For the quarter, the net yield on the Firms interest-earning assets of $1.6 trillion, on a
fully taxable-equivalent (FTE) basis, was 3.10%, an increase of 37 basis points from 2008. For the
first nine months, the net yield on the Firms interest-earning assets of $1.7 trillion, on an FTE
basis, was 3.15%, an increase of 47 basis points from 2008. Excluding the impact of the Washington
Mutual transaction, the increase in net interest income in the quarter and first nine months of the
year was driven by the overall decline in market interest rates during the periods, which benefited
the net interest margin as rates paid on the Firms interest-bearing liabilities declined faster
relative to the decline in rates earned on interest-earning assets. The higher level of the
investment securities portfolio also contributed to the increase in net interest income. The
increase in net interest income was offset partially by lower loan balances, which included the
effect of loan charge-offs.

The provision for credit losses in the third quarter and first nine months of 2009 rose compared
with the equivalent 2008 periods due to increases in the consumer provision. The prior-year quarter
included a $2.0 billion charge to conform Washington Mutuals allowance for loan losses, which
affected both the consumer and wholesale portfolios. For the purpose of the following analysis,
this charge is excluded. The consumer provision reflected additions to the allowance for loan
losses for the home equity, mortgage and credit card portfolios, as weak economic conditions,
housing price declines and higher unemployment rates continued to drive higher estimated losses for
these portfolios. Included in the third-quarter 2009 addition to the allowance for loan losses was
a $1.1 billion increase related to estimated deterioration in the Washington Mutual purchased
credit-impaired portfolio. The wholesale provision increased from the comparable 2008 periods,
reflecting continued deterioration in the credit environment. For a more detailed discussion of the
loan portfolio and the allowance for loan losses, see the segment discussions for RFS on pages
25-32, CS on pages 33-36, IB on pages 21-24 and CB on pages 37-39, and the Allowance for Credit
Losses section on pages 81-84 of this Form 10-Q.

Noninterest expense

The following table presents the components of noninterest expense.

Three months ended September 30,

Nine months ended September 30,

(in millions)

2009

2008

Change

2009

2008

Change

Compensation expense

$

7,311

$

5,858

25

%

$

21,816

$

17,722

23

%

Noncompensation expense:

Occupancy expense

923

766

20

2,722

2,083

31

Technology, communications and
equipment expense

1,140

1,112

3

3,442

3,108

11

Professional & outside services

1,517

1,451

5

4,550

4,234

7

Marketing

440

453

(3

)

1,241

1,412

(12

)

Other expense(a)

1,767

1,096

61

5,332

2,498

113

Amortization of intangibles

254

305

(17

)

794

937

(15

)

Total noncompensation expense

6,041

5,183

17

18,081

14,272

27

Merger costs

103

96

7

451

251

80

Total noninterest expense

$

13,455

$

11,137

21

$

40,348

$

32,245

25

(a)

Includes $675 million accrued for an FDIC special assessment in the second quarter of
2009.

Total noninterest expense for the third quarter of 2009 was $13.5 billion, up $2.3 billion, or
21%, from the third quarter of 2008; for the first nine months of 2009, total noninterest expense
was $40.3 billion, up by $8.1 billion, or 25%, from the comparable 2008 period. The increase was
driven by the impact of the Washington Mutual transaction, higher performance-based compensation
expense, the accrual of $0.7 billion for an FDIC special assessment recognized in the second
quarter of 2009, higher FDIC insurance premiums and increased mortgage-related servicing expense.
These items were offset partially by lower headcount-related expense, which includes salary and
benefits (excluding performance-based incentives), and other noncompensation costs related to
employees.

Compensation expense increased in the third quarter and first nine months of 2009 compared with the
prior-year periods, reflecting higher performance-based incentives, as well as the impact of the
Washington Mutual transaction. Excluding these two items, compensation expense decreased as a
result of the reduction in headcount, particularly in the wholesale businesses and in Corporate.

Noncompensation expense increased from the third quarter of 2008, due predominantly to the
following: the impact of the Washington Mutual transaction; higher litigation costs, partly as a
result of benefits recognized in 2008 from certain litigation matters; higher mortgage
servicing-related expense due to increased delinquencies and defaults, which included an increase
in foreclosed property expense of $0.3 billion; higher FDIC insurance premiums; and the impact of
the dissolution of the Chase Paymentech Solutions joint venture. These items were offset partially
by lower headcount-related expense, particularly in IB, TSS and AM, and lower mortgage reinsurance
losses. Noncompensation expense increased from the first nine months of 2008, primarily due to the
drivers discussed for the third quarter and an accrual of $0.7 billion for an FDIC special
assessment recognized in the second quarter of 2009. The increase was partially offset by lower
credit card marketing expense.

For information on merger costs, refer to Note 10 on page 135 of this Form 10-Q.

The following table presents the Firms income before income tax expense, income tax expense and
effective tax rate.

Three months ended September 30,

Nine months ended September 30,

(in millions, except rate)

2009

2008

2009

2008

Income/(loss) before income tax expense/(benefit)

$

5,063

$

(2,187

)

$

12,191

$

4,115

Income tax expense/(benefit)

1,551

(2,133

)

3,817

(207

)

Effective tax rate

30.6

%

97.5

%

31.3

%

(5.0

)%

The change in the effective tax rate for the third quarter and first nine months of 2009,
compared with the same periods of 2008, was primarily the result of higher reported pretax income
and changes in the proportion of income subject to federal, state and local taxes. In addition, the
third quarter and first nine months of 2008 reflected the realization of benefits of $927 million
and $1.1 billion, respectively, from the release of deferred tax liabilities associated with the
undistributed earnings of certain non-U.S. subsidiaries that were deemed to be reinvested indefinitely. For a
further discussion of income taxes, see Critical Accounting Estimates used by the Firm on pages
92-94 of this Form 10-Q.

Extraordinary gain

The Firm
recognized a $76 million increase in the extraordinary gain in the third quarter of
2009 associated with the final purchase accounting adjustments for the September 25, 2008
acquisition of the banking operations of Washington Mutual, compared with a preliminary gain of
$581 million in the third quarter of 2008. The transaction was accounted for under the purchase
method of accounting in accordance with U.S. GAAP for business combinations. The adjusted net asset
value of the banking operations after purchase accounting adjustments was higher than the
consideration paid by JPMorgan Chase, resulting in these extraordinary gains. For a further
discussion of the Washington Mutual transaction, see Note 2 on pages 102-106 of this Form 10-Q.

EXPLANATION AND RECONCILIATION OF THE FIRMS USE OF NON-GAAP FINANCIAL MEASURES

The Firm prepares its consolidated financial statements using U.S. GAAP; these financial
statements appear on pages 98-101 of this Form 10-Q. That presentation, which is referred to as
reported basis, provides the reader with an understanding of the Firms results that can be
tracked consistently from year to year and enables a comparison of the Firms performance with
other companies U.S. GAAP financial statements.

In addition to analyzing the Firms results on a reported basis, management reviews the Firms
results and the results of the lines of business on a managed basis, which is a non-GAAP
financial measure. The Firms definition of managed basis starts with the reported U.S. GAAP
results and includes certain reclassifications that assume credit card loans securitized by CS
remain on the balance sheet, and it presents revenue on a FTE basis. These adjustments do not have
any impact on net income as reported by the lines of business or by the Firm as a whole.

The presentation of CS results on a managed basis assumes that credit card loans that have been
securitized and sold in accordance with U.S. GAAP remain on the Consolidated Balance Sheets, and
that the earnings on the securitized loans are classified in the same manner as the earnings on
retained loans recorded on the Consolidated Balance Sheets. JPMorgan Chase uses the concept of
managed basis to evaluate the credit performance and overall financial performance of the entire
managed credit card portfolio. Operations are funded and decisions are made about allocating
resources, such as employees and capital, based on managed financial information. In addition, the
same underwriting standards and ongoing risk monitoring are used for both loans on the Consolidated
Balance Sheets and securitized loans. Although securitizations result in the sale of credit card
receivables to a trust, JPMorgan Chase retains the ongoing customer relationships, as the customers
may continue to use their credit cards; accordingly, the customers credit performance will affect
both the securitized loans and the loans retained on the Consolidated Balance Sheets. JPMorgan
Chase believes managed basis information is useful to investors, enabling them to understand both
the credit risks associated with the loans reported on the Consolidated Balance Sheets and the
Firms retained interests in securitized loans. For a reconciliation of reported to managed basis
results for CS, see CS segment results on pages 33-36 of this Form 10-Q. For information regarding
the securitization process, and loans and residual interests sold and securitized, see Note 15 on
pages 147-155 of this Form 10-Q.

Total net revenue for each of the business segments and the Firm is presented on a FTE basis.
Accordingly, revenue from tax-exempt securities and investments that receive tax credits is
presented in the managed results on a basis comparable to taxable securities and investments. This
non-GAAP financial measure allows management to assess the comparability of revenue arising from
both taxable and tax-exempt sources. The corresponding income tax impact related to these items is
recorded within income tax expense.

Tangible common equity (TCE) represents common stockholders equity (i.e., total stockholders
equity less preferred stock) less identifiable intangible assets (other than MSRs) and goodwill,
net of related deferred tax liabilities. ROTCE, a non-GAAP financial ratio, measures the Firms
earnings as a percentage of TCE, and is in managements view a meaningful measure to assess the
Firms use of equity.

Management also uses certain non-GAAP financial measures at the business-segment level, because it
believes these other non-GAAP financial measures provide information to investors about the
underlying operational performance and trends of the particular business segment and, therefore,
facilitate a comparison of the business segment with the performance of its competitors.

Effective January 1, 2009, the Firm implemented new FASB guidance for participating
securities. Accordingly, prior-period amounts have been revised. For further discussion of the
guidance, see Note 21 on pages 166-167 of this Form 10-Q.

(b)

Based on income/(loss) before extraordinary gain.

(c)

The third quarter of 2008 included an accounting conformity loan loss reserve provision
related to the acquisition of Washington Mutuals banking operations.

(d)

See pages 33-36 of this Form 10-Q for a discussion of the effect of credit card
securitizations on CS.

Represents deferred tax liabilities related to tax-deductible goodwill and to identifiable
intangibles created in non-taxable transactions, which are netted against goodwill and other
intangibles when calculating TCE.

Impact on ROE of redemption of TARP preferred stock issued to the U.S. Treasury

The calculation of second-quarter 2009 net income applicable to common equity includes a one-time,
noncash reduction of $1.1 billion resulting from the repayment of TARP preferred capital. Excluding
this reduction ROE would have been 6% for the second quarter of 2009 as disclosed in the table
below. The Firm views the adjusted ROE, a non-GAAP financial measure, as meaningful because it
increases the comparability to prior periods.

Three months ended June 30, 2009

Excluding the

(in millions, except ratios)

As reported

TARP redemption

Return on equity

Net income

$

2,721

$

2,721

Less: Preferred stock dividends

473

473

Less: Accelerated amortization from redemption of preferred stock issued to
the U.S. Treasury

Impact on diluted earnings per share of redemption of TARP preferred stock issued to the U.S. Treasury

Net income applicable to common equity for the second quarter of 2009 included a one-time, noncash
reduction of approximately $1.1 billion resulting from the repayment of TARP preferred capital. The
following table presents the calculations of the effect on net income applicable to common
stockholders for the three months ended June 30, 2009 and the nine months ended September 30, 2009,
and the $0.27 reduction to diluted earnings per share which resulted from the repayment. There was
no impact on diluted earnings per share from the TARP repayment during the third quarter of 2009.

Three months ended June 30, 2009

Nine months ended September 30, 2009

Effect of

Effect of

(in millions, except per share)

As reported

TARP redemption

As reported

TARP redemption

Diluted earnings per share

Net income

$

2,721

$



$

8,450

$



Less: Preferred stock dividends

473



1,165



Less: Accelerated
amortization from redemption
of preferred stock issued to
the U.S. Treasury

The Firm also discloses the allowance for loan losses to total retained loans, excluding home
lending purchased credit-impaired loans and loans held by the Washington Mutual Master Trust. For a
further discussion of this credit metric, see Allowance for Credit
Losses on pages 8184 of this Form
10-Q.

BUSINESS SEGMENT RESULTS

The Firm is managed on a line-of-business basis. The business segment financial results
presented reflect the current organization of JPMorgan Chase. There are six major reportable
business segments: the Investment Bank, Retail Financial Services, Card Services, Commercial
Banking, Treasury & Securities Services and Asset Management, as well as a Corporate/Private Equity
segment. The business segments are determined based on the products and services provided, or the
type of customer served, and reflect the manner in which financial information is currently
evaluated by management. Results of these lines of business are presented on a managed basis.

Description of business segment reporting methodology

Results of the business segments are intended to reflect each segment as if it were essentially a
stand-alone business. The management reporting process that derives business segment results
allocates income and expense using market-based methodologies. For a further discussion of those
methodologies, see Business Segment Results  Description of business segment reporting methodology
on pages 40-41 of JPMorgan Chases 2008 Annual Report. The Firm continues to assess the
assumptions, methodologies and reporting classifications used for segment reporting, and further
refinements may be implemented in future periods.

On September 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual
Bank. On May 30, 2008, the Bear Stearns merger was consummated. Each of these transactions was
accounted for as a purchase, and their respective results of operations are included in the
Firms results from each respective transaction date. For additional information on these
transactions, see Note 2 on pages 123-127 of JPMorgan Chases 2008 Annual Report and Note 2 on
pages 102-106 of this Form 10-Q.

(c)

In the second quarter of 2009, IB began reporting credit reimbursement from TSS as a
component of total net revenue, whereas TSS continues to report its credit reimbursement to IB
as a separate line item on its income statement (not part of total net revenue).
Corporate/Private Equity includes an adjustment to offset IBs inclusion of the credit
reimbursement in total net revenue. Prior periods have been revised for IB and
Corporate/Private Equity to reflect this presentation.

For a discussion of the business profile of IB, see pages 42-44 of JPMorgan Chases 2008
Annual Report and page 5 of this Form 10-Q.

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2009

2008

Change

2009

2008

Change

Revenue

Investment banking fees

$

1,658

$

1,593

4

%

$

5,277

$

4,534

16

%

Principal transactions

2,714

(922

)

NM

8,070

(882

)

NM

Lending- and deposit-related fees

185

118

57

490

325

51

Asset management, administration and
commissions

633

847

(25

)

2,042

2,300

(11

)

All other income(a)

63

(248

)

NM

(101

)

(480

)

79

Noninterest revenue

5,253

1,388

278

15,778

5,797

172

Net interest income(b)

2,255

2,678

(16

)

7,402

6,810

9

Total net revenue(c)

7,508

4,066

85

23,180

12,607

84

Provision for credit losses

379

234

62

2,460

1,250

97

Noninterest expense

Compensation expense

2,778

2,162

28

8,785

6,535

34

Noncompensation expense

1,496

1,654

(10

)

4,330

4,568

(5

)

Total noninterest expense

4,274

3,816

12

13,115

11,103

18

Income before income tax expense/(benefit)

2,855

16

NM

7,605

254

NM

Income tax expense/(benefit)(d)

934

(866

)

NM

2,607

(935

)

NM

Net income

$

1,921

$

882

118

$

4,998

$

1,189

320

Financial ratios

ROE

23

%

13

%

20

%

7

%

ROA

1.12

0.39

0.94

0.19

Overhead ratio

57

94

57

88

Compensation expense as a percentage
of total net revenue

37

53

38

52

Revenue by business

Investment banking fees:

Advisory

$

384

$

576

(33

)

$

1,256

$

1,429

(12

)

Equity underwriting

681

518

31

2,092

1,419

47

Debt underwriting

593

499

19

1,929

1,686

14

Total investment banking fees

1,658

1,593

4

5,277

4,534

16

Fixed income markets

5,011

815

NM

14,829

3,628

309

Equity markets

941

1,650

(43

)

3,422

3,705

(8

)

Credit portfolio

(102

)

8

NM

(348

)

740

NM

Total net revenue

$

7,508

$

4,066

85

$

23,180

$

12,607

84

Revenue by region

Americas

$

3,913

$

1,072

265

$

12,890

$

4,813

168

Europe/Middle East/Africa

2,855

2,517

13

7,685

5,684

35

Asia/Pacific

740

477

55

2,605

2,110

23

Total net revenue

$

7,508

$

4,066

85

$

23,180

$

12,607

84

(a)

TSS was charged a credit reimbursement related to certain exposures managed within IB
credit portfolio on behalf of clients shared with TSS. IB recognizes this credit reimbursement
in its credit portfolio business in All other income. Prior periods have been revised to
conform to the current presentation.

(b)

The decrease in net interest income in the third quarter was due to a lower amount of
interest-earning assets, while the increase in year-to-date 2009 was driven by higher spreads
across several fixed income trading businesses, partially offset by lower balances.

(c)

Total net revenue included tax-equivalent adjustments, predominantly due to income tax
credits related to affordable housing and alternative energy investments, as well as
tax-exempt income from municipal bond investments of $371 million and $427 million for the
quarters ended September 30, 2009 and 2008, respectively, and $1.1 billion for both
year-to-date 2009 and 2008.

(d)

The income tax benefit in the third quarter and year-to-date 2008 was predominantly the
result of reduced deferred tax liabilities on overseas earnings.

Net income was $1.9 billion, an increase of $1.0 billion from the third quarter of 2008. These
results included the negative impact of the tightening of the Firms credit spread, offset by the
positive impact of counterparty spread tightening and gains on legacy leveraged lending and
mortgage-related positions.

Net revenue was $7.5 billion, an increase of $3.4 billion, or 85%, from the prior year. Investment
banking fees were up 4% to $1.7 billion, consisting of equity underwriting fees of $681 million (up
31%), debt underwriting fees of $593 million (up 19%) and advisory fees of $384 million (down 33%).
Fixed Income Markets revenue was $5.0 billion, up by $4.2 billion, reflecting strong results across
most products and gains of approximately $400 million on legacy leveraged lending and
mortgage-related positions, compared with markdowns of $3.6 billion in the prior year. These
results also included losses of $497 million from the tightening of the Firms credit spread on
certain structured liabilities, compared with gains of $343 million in the prior year from the
widening of the spread on those liabilities. Equity Markets revenue was $941 million, down by $709
million, or 43%, which included losses of $343 million from the tightening of the Firms credit
spread on certain structured liabilities, compared with gains in the prior year of $429 million
from the widening of the spread on those liabilities. The current periods results also included
solid client revenue, particularly in prime services, and strong trading results. Credit Portfolio
revenue was a loss of $102 million, reflecting mark-to-market losses on hedges of retained loans,
largely offset by a combination of the positive net impact of credit spreads on derivative assets
and liabilities, and net interest income on loans.

The provision for credit losses increased to $379 million, compared with $234 million in the prior
year. The increase in the provision reflected deterioration in the credit environment compared with
the third quarter of 2008. Net charge-offs were $750 million compared with $13 million in the prior
year. The allowance for loan losses to end-of-period loans retained was 8.44%, compared with 3.62%
in the prior year. Nonperforming loans were $4.9 billion, up by $4.5 billion from the prior year.

Noninterest expense was $4.3 billion, up by $458 million, or 12%, from the prior year. The increase
was driven by higher performance-based compensation, partially offset by lower headcount-related
expense.

Return on equity was 23% on $33.0 billion of average allocated capital, compared with 13% on $26.0
billion of average allocated capital in the prior year.

Year-to-date results

Net income was $5.0 billion, an increase of $3.8 billion from the prior year. The results reflected
higher net revenue, partially offset by higher noninterest expense and a higher provision for
credit losses.

Net revenue was $23.2 billion, an increase of $10.6 billion, or 84%, from the prior year.
Investment banking fees were up 16% to $5.3 billion, consisting of equity underwriting fees of $2.1
billion (up 47%), debt underwriting fees of $1.9 billion (up 14%) and advisory fees of $1.3 billion
(down 12%). Fixed Income Markets revenue was $14.8 billion, up by $11.2 billion, reflecting strong
results across all products, as well as significantly lower net markdowns on legacy leveraged
lending and mortgage-related positions, compared with markdowns of $7.7 billion in the prior year.
These results also included losses of $848 million from the tightening of the Firms credit spread
on certain structured liabilities, compared with gains of $1.2 billion in the prior year from the
widening of the spread on those liabilities. Equity Markets revenue was $3.4 billion, down by $283
million, or 8%, which included losses of $453 million from the tightening of the Firms credit
spread on certain structured liabilities, compared with gains in the prior year of $865 million
from the widening of the spread on those liabilities. The current periods results also included
solid client revenue, particularly in prime services, and strong trading results. Credit Portfolio
revenue was a loss of $348 million, down by $1.1 billion, reflecting mark-to-market losses on
hedges of retained loans, partially offset by a combination of the positive net impact of credit
spreads on derivative assets and liabilities, and net interest income on loans.

The provision for credit losses increased to $2.5 billion from $1.3 billion in the prior year,
reflecting continued deterioration in the credit environment. Net charge-offs were $1.2 billion in
2009, compared with $18 million in the prior year.

Noninterest expense was $13.1 billion, up by $2.0 billion, or 18%, from the prior year. The
increase was driven by higher performance-based compensation, partially offset by lower
noncompensation expense.

Return on Equity was 20% on $33.0 billion of average allocated capital, compared with 7% on $23.8
billion of average allocated capital in the prior year.

Adjusted assets, a non-GAAP financial measure, equals total assets minus: (1) securities
purchased under resale agreements and securities borrowed less securities sold, not yet
purchased; (2) assets of consolidated variable interest entities (VIEs); (3) cash and
securities segregated and on deposit for regulatory and other purposes; (4) goodwill and
intangibles; (5) securities received as collateral; and (6) investments purchased under the
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AML Facility).
The amount of adjusted assets is presented to assist the reader in comparing IBs asset and
capital levels to other investment banks in the securities industry. Asset-to-equity leverage
ratios are commonly used as one measure to assess a companys capital adequacy. IB believes an
adjusted asset amount that excludes the assets discussed above, which were considered to have
a low risk profile, provides a more meaningful measure of balance sheet leverage in the
securities industry.

(c)

Allowance for loan losses of $1.8 billion and $72 million were held against these
nonperforming loans at September 30, 2009 and 2008, respectively. Nonperforming loans excluded
distressed loans held-for-sale that were purchased as part of IBs proprietary activities.

(d)

Loans held-for-sale and loans at fair value were excluded when calculating the allowance
coverage ratio and net charge-off rate.

(e)

Results for year-to-date 2008 include four months of the combined Firms (JPMorgan Chase &
Co.s and Bear Stearns) results and five months of heritage JPMorgan Chase & Co results. For
a more complete description of value-at-risk, see pages 84-89 of this Form 10-Q.

(f)

Average VaRs were less than the sum of the VaRs of their market risk components, which was
due to risk offsets resulting from portfolio diversification. The diversification effect
reflected the fact that the risks were not perfectly correlated. The risk of a portfolio of
positions is usually less than the sum of the risks of the positions themselves.

(g)

Trading VaR includes predominantly all trading activities in IB. Trading VaR does not include
VaR related to held-for-sale funded loans and unfunded commitments, nor the debit valuation
adjustments (DVA) taken on derivative and structured liabilities to reflect the credit
quality of the Firm. See the DVA Sensitivity table on page 89 of this Form 10-Q for further
details. Trading VaR also does not include the MSR portfolio or VaR related to other corporate
functions, such as Corporate/Private Equity. Beginning in the fourth quarter of 2008, trading
VaR includes the estimated credit spread sensitivity of certain mortgage products.

(h)

Includes VaR on derivative credit valuation adjustments (CVA), hedges of the CVA and
mark-to-market hedges of the retained loan portfolio, which were all reported in principal
transactions revenue. This VaR does not include the retained loan portfolio.

(i)

Excluding the impact of a loan originated in March 2008 to Bear Stearns, the adjusted ratio
would be 3.76% for year-to-date 2008. The average balance of the loan extended to Bear Stearns
was $2.6 billion for year-to-date 2008.

According to Thomson Reuters, for the first nine months of 2009, the Firm was ranked #1 in
Global Debt, Equity and Equity-Related; #1 in Global Equity and Equity-Related; #1 in Global
Long-Term Debt; #1 in Global Syndicated Loans and #4 in Global Announced M&A based on volume.

According to Dealogic, the Firm was ranked #1 in Investment Banking fees generated for the first
nine months of 2009, based on revenue.

Includes rights offerings, and U.S.-domiciled equity and equity-related transactions.

(d)

Global announced M&A is based on rank value; all other rankings are based on proceeds, with
full credit to each book manager/equal if joint. Because of joint assignments, market share of
all participants will add up to more than 100%. Global and U.S. announced M&A market share and
rankings for 2008 include transactions withdrawn since December 31, 2008. U.S. announced M&A
represents any U.S. involvement ranking.

For a discussion of the business profile of RFS, see pages 45-50 of JPMorgan Chases 2008
Annual Report and page 5 of this Form 10-Q.

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2009

2008

Change

2009

2008

Change

Revenue

Lending- and deposit-related fees

$

1,046

$

538

94

%

$

2,997

$

1,496

100

%

Asset management, administration
and commissions

408

346

18

1,268

1,098

15

Mortgage fees and related income

873

438

99

3,313

1,659

100

Credit card income

416

204

104

1,194

572

109

Other income

321

206

56

829

556

49

Noninterest revenue

3,064

1,732

77

9,601

5,381

78

Net interest income

5,154

3,231

60

15,422

9,455

63

Total net revenue

8,218

4,963

66

25,023

14,836

69

Provision for credit losses

3,988

2,056

94

11,711

6,329

85

Noninterest expense

Compensation expense

1,728

1,120

54

4,990

3,464

44

Noncompensation expense

2,385

1,559

53

7,207

4,267

69

Amortization of intangibles

83

100

(17

)

249

300

(17

)

Total noninterest expense

4,196

2,779

51

12,446

8,031

55

Income before income tax expense

34

128

(73

)

866

476

82

Income tax expense

27

64

(58

)

370

220

68

Net income

$

7

$

64

(89

)

$

496

$

256

94

Financial ratios

ROE



%

1

%

3

%

2

%

Overhead ratio

51

56

50

54

Overhead ratio excluding core
deposit
intangibles(a)

50

54

49

52

(a)

Retail Financial Services uses the overhead ratio (excluding the amortization of core
deposit intangibles (CDI)), a non-GAAP financial measure, to evaluate the underlying expense
trends of the business. Including CDI amortization expense in the overhead ratio calculation
results in a higher overhead ratio in the earlier years and a lower overhead ratio in later
years; this method would result in an improving overhead ratio over time, all things remaining
equal. This non-GAAP ratio excludes Retail Bankings core deposit intangible amortization
expense, related to the 2006 Bank of New York transaction and the 2004 Bank One merger, of $83
million and $99 million for the quarters ended September 30, 2009 and 2008, respectively, and
$248 million and $297 million for year-to-date September 30, 2009 and 2008, respectively.

Quarterly results

Net income was $7 million, a decrease of $57 million from the third quarter of 2008, as an increase
in the provision for credit losses was largely offset by the positive impact of the Washington
Mutual transaction.

Net revenue was $8.2 billion, an increase of $3.3 billion, or 66%, from the prior year. Net
interest income was $5.2 billion, up by $1.9 billion, or 60%, reflecting the impact of the
Washington Mutual transaction, wider loan spreads and higher deposit balances offset partially by
lower loan balances. Noninterest revenue was $3.1 billion, up by $1.3 billion, or 77%, driven by
the impact of the Washington Mutual transaction, higher net mortgage servicing revenue and higher
deposit-related fees, partially offset by lower mortgage production revenue.

The provision for credit losses was $4.0 billion, an increase of $1.9 billion from the prior year.
Weak economic conditions and housing price declines continued to drive higher estimated losses for
the home equity and mortgage loan portfolios. The provision included an addition of $1.4 billion to
the allowance for loan losses, compared with additions of $730 million in the prior year. Included
in the third-quarter 2009 addition to the allowance for loan losses was a $1.1 billion increase
related to estimated deterioration in the Washington Mutual purchased credit-impaired portfolio.
Home equity net charge-offs were $1.1 billion (3.38% net charge-off rate; 4.25% excluding purchased
credit-impaired loans), compared with $663 million (2.78% net charge-off rate) in the prior year.
Subprime mortgage net charge-offs were $422 million (8.46% net charge-off rate; 12.31% excluding
purchased credit-impaired loans), compared with $273 million (7.65% net charge-off rate) in the
prior year. Prime mortgage net charge-offs were $525 million (2.58% net charge-off rate; 3.45%
excluding purchased credit-impaired loans), compared with $177 million (1.79% net charge-off rate)
in the prior year.

Noninterest expense was $4.2 billion, an increase of $1.4 billion, or 51%. The increase reflected
the impact of the Washington Mutual transaction and higher servicing expense, partially offset by
lower mortgage reinsurance losses.

Year-to-date results

Net income was $496 million, an increase of $240 million from the prior year, as the positive
impact of the Washington Mutual transaction was partially offset by an increase in the provision
for credit losses.

Net revenue was $25.0 billion, an increase of $10.2 billion, or 69%, from the prior year. Net
interest income was $15.4 billion, up by $6.0 billion, or 63%, reflecting the impact of the
Washington Mutual transaction, wider loan and deposit spreads and higher average deposit balances.
Noninterest revenue was $9.6 billion, up by $4.2 billion, or 78%, driven by the impact of the
Washington Mutual transaction and higher net mortgage servicing revenue.

Loans at fair value consist of prime mortgages originated with the intent to sell that
are accounted for at fair value and classified as trading assets on the Consolidated Balance
Sheets. These loans totaled $12.8 billion and $8.6 billion at September 30, 2009 and 2008,
respectively. Average balances of these loans totaled $17.7 billion and $14.5 billion for the
quarters ended September 30, 2009 and 2008, respectively, and $15.8 billion and $14.9 billion
for year-to-date 2009 and 2008, respectively.

(b)

Excludes purchased credit-impaired loans that were acquired as part of the Washington Mutual
transaction. These loans are accounted for on a pool basis, and the pools are considered to
be performing.

(c)

Certain of these loans are classified as trading assets on the Consolidated Balance Sheets.

(d)

At September 30, 2009 and 2008, nonperforming loans and assets excluded: (1)
mortgage loans insured by U.S. government agencies of $7.0 billion and $1.4 billion,
respectively; (2) real estate owned insured by U.S. government agencies of $579 million and
$370 million, respectively; and (3) student loans that are 90 days past due and still
accruing, which are insured by U.S. government agencies under the Federal Family Education
Loan Program, of $511 million and $405 million, respectively. These amounts are excluded, as
reimbursement is proceeding normally.

(e)

Loans held-for-sale and loans accounted for at fair value were excluded when calculating the
allowance coverage ratio and the net charge-off rate.

(f)

Excludes the impact of purchased credit-impaired loans that were acquired as part of the
Washington Mutual transaction. These loans were accounted for at fair value on the acquisition
date, which incorporated managements estimate, as of that date, of credit losses over the
remaining life of the portfolio. During the third quarter of 2009, an allowance for loan
losses of $1.1 billion was recorded for these loans. To date, no charge-offs have been
recorded for these loans.

RETAIL BANKING

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2009

2008

Change

2009

2008

Change

Noninterest revenue

$

1,844

$

1,089

69

%

$

5,365

$

3,117

72

%

Net interest income

2,732

1,756

56

8,065

4,972

62

Total net revenue

4,576

2,845

61

13,430

8,089

66

Provision for credit losses

208

70

197

894

181

394

Noninterest expense

2,646

1,580

67

7,783

4,699

66

Income before income tax expense

1,722

1,195

44

4,753

3,209

48

Net income

$

1,043

$

723

44

$

2,876

$

1,942

48

Overhead ratio

58

%

56

%

58

%

58

%

Overhead ratio excluding core
deposit
intangibles(a)

56

52

56

54

(a)

Retail Banking uses the overhead ratio (excluding the amortization of CDI), a non-GAAP
financial measure, to evaluate the underlying expense trends of the business. Including CDI
amortization expense in the overhead ratio calculation results in a higher overhead ratio in
the earlier years and a lower overhead ratio in later years; this method would result in an
improving overhead ratio over time, all things remaining equal. This non-GAAP ratio excludes
Retail Bankings CDI amortization expense, related to the 2006 Bank of New York transaction
and the 2004 Bank One merger, of $83 million and $99 million for the quarters ended
September 30, 2009 and 2008, respectively, and $248 million and $297 million for
year-to-date 2009 and 2008, respectively.

Consumer Lending reported a net loss of $1.0 billion, compared with a net loss of $659 million in
the prior year.

Net revenue was $3.6 billion, up by $1.5 billion, or 72%, from the prior year. The increase was
driven by the impact of the Washington Mutual transaction, higher mortgage fees and related income
and wider loan spreads, partially offset by lower loan balances. Mortgage production revenue was
negative $70 million, compared with positive $66 million in the prior year, as an increase in
reserves for the repurchase of previously-sold loans was predominantly offset by wider margins on
new originations. Operating revenue, which represents loan servicing revenue net of other changes
in fair value of the MSR asset, was $508 million, compared with $264 million in the prior year,
reflecting growth in average third-party loans serviced as a result of the Washington Mutual
transaction. MSR risk management results were $435 million, compared with $108 million in the prior
year.

The provision for credit losses was $3.8 billion, compared with $2.0 billion in the prior year,
reflecting continued weakness in the home equity and mortgage loan portfolios (see Retail Financial
Services discussion of the provision for credit losses, above, for further detail).

Noninterest expense was $1.6 billion, up by $351 million, or 29%, from the prior year, reflecting
higher servicing expense due to increased delinquencies and defaults and the impact of the
Washington Mutual transaction, partially offset by lower mortgage reinsurance losses.

Year-to-date results

Consumer Lending reported a net loss of $2.4 billion, compared with a net loss of $1.7 billion in
the prior year.

Net revenue was $11.6 billion, up by $4.8 billion, or 72%, from the prior year. The increase was
driven by the impact of the Washington Mutual transaction, higher mortgage fees and related income
and wider loan spreads, partially offset by lower loan balances. Mortgage production revenue was
$695 million, down $141 million from the prior year, as an increase in reserves for the repurchase
of previously-sold loans was predominantly offset by wider margins on new originations. Operating
revenue, which represents loan servicing revenue net of other changes in fair value of the MSR
asset, was $1.1 billion, compared with $683 million in the prior year, reflecting growth in average
third-party loans serviced as a result of the Washington Mutual transaction. MSR risk management
results were $1.5 billion, compared with $140 million in the prior year, reflecting the positive
impact of a decrease in estimated future mortgage prepayments and positive hedging results.

The provision for credit losses was $10.8 billion, compared with $6.1 billion in the prior year,
reflecting continued weakness in the home equity and mortgage loan portfolios (see Retail Financial
Services discussion of the provision for credit losses, above, for further detail).

Noninterest expense was $4.7 billion, up by $1.3 billion, or 40%, from the prior year, reflecting
higher servicing expense due to increased delinquencies and defaults and the impact of the
Washington Mutual transaction, partially offset by lower mortgage reinsurance losses.

Purchased credit-impaired loans represent loans acquired in the Washington Mutual transaction
for which a deterioration in credit quality occurred between the origination date and JPMorgan
Chases acquisition date. These loans were initially recorded at fair value and accrete
interest income over the estimated life of the loan when cash flows are reasonably estimable,
even if the underlying loans are contractually past due.

(b)

Total average loans owned includes loans held-for-sale of $1.3 billion and $1.5 billion for
the quarters ended September 30, 2009 and 2008, respectively; and $2.4 billion and $3.2
billion for year-to-date 2009 and 2008, respectively.

Excludes the impact of purchased credit-impaired loans that were acquired as part of the
Washington Mutual transaction. These loans were accounted for at fair value on the
acquisition date, which incorporated managements estimate, as of that date, of credit losses
over the remaining life of the portfolio. An allowance for loan losses of $1.1 billion has
been recorded for these loans as of September 30, 2009. To date, no charge-offs have been
recorded for these loans.

(b)

Average loans held-for-sale of $1.3 billion and $1.5 billion for the quarters ended
September 30, 2009 and 2008, respectively, and $2.4 billion and $3.2 billion for year-to-date
2009 and 2008, respectively, were excluded when calculating the net charge-off rate.

(c)

Excluded mortgage loans that are insured by U.S. government agencies of $7.7 billion and
$2.2 billion at September 30, 2009 and 2008, respectively. These amounts are excluded, as
reimbursement is proceeding normally.

(d)

Excluded loans that are 30 days past due and still accruing, which are insured by U.S.
government agencies under the Federal Family Education Loan Program, of $903 million and $787
million at September 30, 2009 and 2008, respectively. These amounts are excluded, as
reimbursement is proceeding normally.

(e)

The delinquency rate for purchased credit-impaired loans was 25.56% and 13.21% at September
30, 2009 and 2008, respectively.

(f)

At September 30, 2009 and 2008, nonperforming assets excluded: (1) mortgage loans insured by
U.S. government agencies of $7.0 billion and $1.4 billion, respectively; (2) real estate
owned insured by U.S. government agencies of $579 million and $370 million, respectively; and
(3) student loans that are 90 days past due and still accruing, which are insured by U.S.
government agencies under the Federal Family Education Loan Program, of $511 million and $405
million, respectively. These amounts are excluded, as reimbursement is proceeding normally.

(g)

Excludes purchased credit-impaired loans that were acquired as part of the Washington Mutual
transaction. These loans are accounted for on a pool basis, and the pools are considered to
be performing.

Includes rural housing loans sourced through brokers and underwritten under U.S. Department
of Agriculture guidelines.

(b)

Loans at fair value consist of prime mortgages originated with the intent to sell that are
accounted for at fair value and classified as trading assets on the Consolidated Balance
Sheets. Average balances of these loans totaled $17.7 billion and $14.5 billion for the
quarters ended September 30, 2009 and 2008, respectively, and $15.8 billion and $14.9 billion
for year-to-date 2009 and 2008, respectively.

For a discussion of the business profile of CS, see pages 51-53 of JPMorgan Chases 2008 Annual
Report and page 5 of this Form 10-Q.

JPMorgan Chase uses the concept of managed basis to evaluate the credit performance of its credit
card loans, both loans on the balance sheet and loans that have been securitized. For further
information, see Explanation and Reconciliation of the Firms Use of Non-GAAP Financial Measures on
pages 15-19 of this Form 10-Q. Managed results exclude the impact of credit card securitizations on
total net revenue, the provision for credit losses, net charge-offs and loan receivables.
Securitization does not change reported net income; however, it does affect the classification of
items on the Consolidated Statements of Income and Consolidated Balance Sheets.

Selected income statement data -managed basis

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2009

2008

Change

2009

2008

Change

Revenue

Credit card income

$

916

$

633

45

%

$

2,681

$

1,906

41

%

All other income

(85

)

13

NM

(646

)

223

NM

Noninterest revenue

831

646

29

2,035

2,129

(4

)

Net interest income

4,328

3,241

34

13,121

9,437

39

Total net revenue

5,159

3,887

33

15,156

11,566

31

Provision for credit losses

4,967

2,229

123

14,223

6,093

133

Noninterest expense

Compensation expense

354

267

33

1,040

792

31

Noncompensation expense

829

773

7

2,552

2,377

7

Amortization of intangibles

123

154

(20

)

393

482

(18

)

Total noninterest expense

1,306

1,194

9

3,985

3,651

9

Income/(loss) before income tax
expense

(1,114

)

464

NM

(3,052

)

1,822

NM

Income tax expense/(benefit)

(414

)

172

NM

(1,133

)

671

NM

Net income/(loss)

$

(700

)

$

292

NM

$

(1,919

)

$

1,151

NM

Memo: Net securitization income/(loss)

$

(43

)

$

(28

)

(54

)

$

(491

)

$

78

NM

Financial ratios

ROE

(19

)%

8

%

(17

)%

11

%

Overhead ratio

25

31

26

32

Quarterly results

Card Services reported a net loss of $700 million, a decline of $992 million from the third quarter
of 2008. The decrease was driven by a higher provision for credit losses, partially offset by
higher net revenue.

End-of-period managed loans were $165.2 billion, a decrease of $21.3 billion, or 11%, from the
prior year. The decrease was due to lower charge volume and a higher level of charge-offs. Average
managed loans were $169.2 billion, an increase of $11.6 billion, or 7%, from the prior year.
Excluding the impact of the Washington Mutual transaction, end-of-period and average managed loans
were $144.1 billion and $146.9 billion, respectively.

Managed net revenue was $5.2 billion, an increase of $1.3 billion, or 33%, from the prior year. Net
interest income was $4.3 billion, up by $1.1 billion, or 34%, driven by the impact of the
Washington Mutual transaction and wider loan spreads. These benefits were offset partially by
higher revenue reversals associated with higher charge-offs, lower average loan balances and a
decreased level of fees. Noninterest revenue was $831 million, up by $185 million, or 29%. The
increase was driven by higher merchant servicing revenue related to the dissolution of the Chase
Paymentech Solutions joint venture and the impact of the Washington Mutual transaction.

The managed provision for credit losses was $5.0 billion, an increase of $2.7 billion from the
prior year. The provision reflected a higher level of charge-offs and an increase of $575 million
in the allowance for loan losses in the current period, compared with an increase of $250 million
in the prior year. The managed net charge-off rate for the quarter was 10.30%, up from 5.00% in the
prior year. The 30-day managed delinquency rate was 5.99%, up from 3.91% in the prior year.
Excluding the impact of the Washington Mutual transaction, the managed net charge-off rate for the
third quarter was 9.41%, and the 30-day delinquency rate was 5.38%.

Noninterest expense was $1.3 billion, an increase of $112 million, or 9%, from the prior year, due
to the dissolution of the Chase Paymentech Solutions joint venture and the impact of the Washington
Mutual transaction.

Year-to-date results

Net loss was $1.9 billion, a decline of $3.1 billion from the prior year. The decrease was driven
by a higher provision for credit losses, partially offset by higher net revenue.

Average managed loans were $175.5 billion, an increase of $20.9 billion, or 13%, from the prior
year. The increase from the prior year was predominantly due to the impact of the Washington Mutual
transaction. Excluding the impact of the Washington Mutual transaction, average managed loans were
$150.8 billion.

Managed net revenue was $15.2 billion, an increase of $3.6 billion, or 31%, from the prior year.
Net interest income was $13.1 billion, up by $3.7 billion, or 39%, from the prior year, driven by
the impact of the Washington Mutual transaction and wider loan spreads. These benefits were offset
partially by higher revenue reversals associated with higher charge-offs and a decreased level of
fees. Noninterest revenue was $2.0 billion, a decrease of $94 million, or 4%, from the prior year.
The decline was driven by lower securitization income combined with an increase in the credit
enhancement for securitization trusts, partially offset by higher merchant servicing revenue
related to the dissolution of the Chase Paymentech Solutions joint venture and the impact of the
Washington Mutual transaction.

The managed provision for credit losses was $14.2 billion, an increase of $8.1 billion from the
prior year. The provision reflected a higher level of charge-offs and an increase of $2.0 billion
in the allowance for loan losses in the current period, compared with an increase of $550 million
in the prior year. The managed net charge-off rate was 9.32%, up from 4.79% in the prior year.
Excluding the impact of the Washington Mutual transaction, the managed net charge-off rate was
8.39%.

Noninterest expense was $4.0 billion, an increase of $334 million, or 9%, from the prior year, due
to the impact of the Washington Mutual transaction and the dissolution of the Chase Paymentech
Solutions joint venture, partially offset by lower marketing expense.

Third quarter of 2008 included approximately 13 million credit card accounts acquired by
JPMorgan Chase in the Washington Mutual transaction.

(d)

The Chase Paymentech Solutions joint venture was dissolved effective November 1, 2008.
JPMorgan Chase retained approximately 51% of the business and operates the business under the
name Chase Paymentech Solutions. For the three and nine months ended September 30, 2008, the
data presented represents activity for the Chase Paymentech Solutions joint venture, and for
the three and nine months ended September 30, 2009, the data presented represents activity for
Chase Paymentech Solutions.

(e)

Results reflect the impact of purchase accounting adjustments related to the Washington
Mutual transaction and the consolidation of the Washington Mutual Master Trust.

(f)

Based on loans on balance sheets (reported basis).

(g)

Includes $3.0 billion of loans at September 30, 2009, held by the Washington Mutual Master
Trust, which were consolidated onto the Card Services balance sheet at fair value during the
second quarter of 2009. No allowance for loan losses was recorded for these loans as of
September 30, 2009. Excluding these loans, the allowance for loan losses to period-end loans
was 12.36%.

(h)

As a percentage of average managed outstandings.

(i)

Excludes the impact of purchase accounting adjustments related to the Washington Mutual
transaction and the consolidation of the Washington Mutual Master Trust.

JPMorgan Chase uses the concept of managed basis to evaluate the credit performance and
overall performance of the underlying credit card loans, both sold and not sold; as the same
borrower is continuing to use the credit card for ongoing charges, a borrowers credit
performance will affect both the receivables sold and those not sold. Thus, in its disclosures
regarding managed receivables, JPMorgan Chase treats the sold receivables as if they were
still on the balance sheet in order to disclose the credit performance (such as net charge-off
rates) of the entire managed credit card portfolio. Managed results exclude the impact of
credit card securitizations on total net revenue, the provision for credit losses, net
charge-offs and loan receivables. Securitization does not change reported net income versus
managed earnings; however, it does affect the classification of items on the Consolidated
Statements of Income and Consolidated Balance Sheets. For further information, see Explanation
and Reconciliation of the Firms Use of Non-GAAP Financial Measures on pages 15-19 of this
Form 10-Q.

Net income was $341 million, an increase of $29 million, or 9%, from the third quarter of 2008.
Higher net revenue, reflecting the impact of the Washington Mutual transaction, was predominantly
offset by a higher provision for credit losses and higher noninterest expense.

Net revenue was $1.5 billion, an increase of $334 million, or 30%, from the prior year. Net
interest income was $985 million, up by $248 million, or 34%, driven by the impact of the
Washington Mutual transaction. Excluding Washington Mutual, net interest income was flat compared
with the prior year, as spread compression on liability products and lower loan balances were
offset by wider loan spreads, a shift to higher-spread liability products and overall growth in
liability balances. Noninterest revenue was $474 million, an increase of $86 million, or 22%,
reflecting higher lending- and deposit-related fees.

Revenue from Middle Market Banking was $771 million, an increase of $42 million, or 6%, from the
prior year. Revenue from Commercial Term Lending (a new business resulting from the Washington
Mutual transaction) was $232 million. Revenue from Mid-Corporate Banking was $278 million, an
increase of $42 million, or 18%, from the prior year. Revenue from Real Estate Banking was $121
million, an increase of $30 million, or 33%, from the prior year due to the impact of the
Washington Mutual transaction.

The provision for credit losses was $355 million, compared with $126 million in the prior year,
reflecting continued deterioration in the credit environment across all business segments,
particularly real estate-related segments. Net charge-offs were $291 million (1.11% net charge-off
rate), compared with $40 million (0.22% net charge-off rate) in the prior year. The allowance for
loan losses to end-of-period loans retained was 3.01%, up from 2.30% in the prior year.
Nonperforming loans were $2.3 billion, up by $1.5 billion from the prior year.

Noninterest expense was $545 million, an increase of $59 million, or 12%, from the prior year, due
to the impact of the Washington Mutual transaction and higher FDIC insurance premiums.

Year-to-date results

Net income was $1.0 billion, an increase of $88 million, or 9%, from the prior year, as higher net
revenue reflecting the impact of the Washington Mutual transaction, was predominantly offset by a
higher provision for credit losses and higher noninterest expense.

Net revenue was $4.3 billion, an increase of $1.0 billion, or 31%, from the prior year. Net
interest income of $3.0 billion increased by $767 million, or 35%, driven by the impact of the
Washington Mutual transaction. Noninterest revenue was $1.4 billion, an increase of $249 million,
or 23%, from the prior year, reflecting higher lending- and deposit-related fees and higher
investment banking fees.

Revenue from Middle Market Banking was $2.3 billion, an increase of $152 million, or 7%, from the
prior year. Revenue from Commercial Term Lending (a new business resulting from the Washington
Mutual transaction) was $684 million. Mid-Corporate Banking revenue was $825 million, an increase
of $147 million, or 22%. Real Estate Banking revenue was $361 million, an increase of $79 million,
or 28%, due to the impact of the Washington Mutual transaction.

The provision for credit losses was $960 million, compared with $274 million in the prior year,
reflecting continued deterioration in the credit environment across all business segments. Net
charge-offs were $606 million (0.75% net charge-off rate), compared with $170 million (0.32% net
charge-off rate) in the prior year. The allowance for loan losses to end-of-period loans retained
was 3.01%, up from 2.30% in the prior year. Nonperforming loans were $2.3 billion, an increase of
$1.5 billion from the prior year.

Noninterest expense was $1.6 billion, an increase of $186 million, or 13%, from the prior year, due
to the impact of the Washington Mutual transaction and higher FDIC insurance premiums.

Liability balances include deposits and deposits swept to on-balance sheet liabilities, such
as commercial paper, federal funds purchased and securities loaned or sold under repurchase
agreements.

(b)

Results for 2009 include loans acquired in the Washington Mutual transaction.

(c)

Allowance for loan losses of $496 million and $135 million were held against nonperforming
loans retained at September 30, 2009 and 2008, respectively.

(d)

Average loans in the calculation of this ratio were adjusted to include $44.5 billion of
loans acquired from Washington Mutual as if the transaction occurred on July 1, 2008.
Excluding this adjustment, the unadjusted allowance for loan losses to average loans retained
and nonperforming loans to total average loans ratios would have been 3.75% and 1.17%,
respectively, for the period ended September 30, 2008, and 3.85% and 1.20%, respectively, for
the nine months ended September 30, 2008.

For a discussion of the business profile of TSS, see pages 56-57 of JPMorgan Chases 2008 Annual
Report and page 6 of this Form 10-Q.

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except headcount and ratios)

2009

2008

Change

2009

2008

Change

Revenue

Lending- and deposit-related fees

$

316

$

290

9

%

$

955

$

842

13

%

Asset management, administration and
commissions

620

719

(14

)

1,956

2,385

(18

)

All other income

201

221

(9

)

619

649

(5

)

Noninterest revenue

1,137

1,230

(8

)

3,530

3,876

(9

)

Net interest income

651

723

(10

)

1,979

2,009

(1

)

Total net revenue

1,788

1,953

(8

)

5,509

5,885

(6

)

Provision for credit losses

13

18

(28

)

2

37

(95

)

Credit reimbursement to IB(a)

(31

)

(31

)



(91

)

(91

)



Noninterest expense

Compensation expense

629

664

(5

)

1,876

1,974

(5

)

Noncompensation expense

633

661

(4

)

1,954

1,864

5

Amortization of intangibles

18

14

29

57

46

24

Total noninterest expense

1,280

1,339

(4

)

3,887

3,884



Income before income tax expense

464

565

(18

)

1,529

1,873

(18

)

Income tax expense

162

159

2

540

639

(15

)

Net income

$

302

$

406

(26

)

$

989

$

1,234

(20

)

Revenue by business

Treasury Services(b)

$

919

$

946

(3

)

$

2,784

$

2,711

3

Worldwide Securities Services(b)

869

1,007

(14

)

2,725

3,174

(14

)

Total net revenue

$

1,788

$

1,953

(8

)

$

5,509

$

5,885

(6

)

Financial ratios

ROE

24

%

46

%

26

%

47

%

Overhead ratio

72

69

71

66

Pretax margin ratio(c)

26

29

28

32

Selected balance sheet data (period-end)

Loans

$

19,693

$

40,675

(52

)

$

19,693

$

40,675

(52

)

Equity

5,000

4,500

11

5,000

4,500

11

Selected balance sheet data (average)

Total assets

$

33,117

$

49,386

(33

)

$

35,753

$

54,243

(34

)

Loans(d)

17,062

26,650

(36

)

18,231

24,527

(26

)

Liability balances(e)

231,502

259,992

(11

)

247,219

260,882

(5

)

Equity

5,000

3,500

43

5,000

3,500

43

Headcount

26,389

27,592

(4

)

26,389

27,592

(4

)

(a)

IB credit portfolio group manages certain exposures on behalf of clients shared with TSS. TSS
reimburses IB for a portion of the total cost of managing the credit portfolio. IB recognizes
this credit reimbursement as a component of noninterest revenue.

(b)

Reflects an internal reorganization for escrow products from Worldwide Securities Services to
Treasury Services revenue of $38 million and $49 million for the three months ended September
30, 2009 and 2008, respectively, and $129 million and $148 million for the nine months ended
September 30, 2009 and 2008, respectively.

(c)

Pretax margin represents income before income tax expense divided by total net revenue, which
is a measure of pretax performance and another basis by which management evaluates its
performance and that of its competitors.

Net income was $302 million, a decrease of $104 million, or 26%, from the third quarter of 2008.
The decrease was driven by lower net revenue, offset partially by lower noninterest expense.

Net revenue was $1.8 billion, a decrease of $165 million, or 8%, from the prior year. Worldwide
Securities Services net revenue was $869 million, a decrease of $138 million, or 14%. The decrease
was driven by lower securities lending balances, primarily as a result of declines in asset
valuations and demand, lower spreads and balances on liability products, and the effect of market
depreciation on certain custody assets. Treasury Services net revenue was $919 million, a decrease
of $27 million, or 3%. The decrease reflected spread compression on deposit products offset by
higher trade revenue driven by wider spreads, and higher card product volumes. TSS firmwide net
revenue, which includes net revenue recorded in other lines of business, was $2.5 billion, a
decrease of $149 million, or 6%, primarily due to declines in Worldwide Securities Services.
Treasury Services firmwide net revenue was $1.7 billion, flat compared with the prior year.

The provision for credit losses was $13 million, a decrease of $5 million from the prior year.

Net income was $989 million, a decrease of $245 million, or 20%, from the prior year, driven by
lower net revenue.

Net revenue was $5.5 billion, a decrease of $376 million, or 6%, from the prior year. Worldwide
Securities Services net revenue was $2.7 billion, a decrease of $449 million, or 14%, from the
prior year. The decrease was driven by lower securities lending balances, primarily as a result of
declines in asset valuations and demand, as well as the effect of market depreciation on certain
custody assets. Treasury Services net revenue was $2.8 billion, an increase of $73 million, or 3%,
reflecting higher trade revenue driven by wider spreads and growth across cash management and card
product volumes, partially offset by spread compression on deposit products. TSS firmwide net
revenue, which includes net revenue recorded in other lines of business, was $7.7 billion, a
decrease of $297 million, or 4%, compared with the prior year, primarily due to declines in
Worldwide Securities Services. Treasury Services firmwide net revenue grew to $5.0 billion, an
increase of $152 million, or 3%, from the prior year.

The provision for credit losses was $2 million, a decrease of $35 million from the prior year.

Reflects an internal reorganization for escrow products, from Worldwide Securities Services
to Treasury Services revenue, of $38 million and $49 million for the three months ended
September 30, 2009 and 2008, respectively, and $129 million and $148 million for the nine
months ended September 30, 2009 and 2008, respectively.

(b)

TSS firmwide revenue includes FX revenue recorded in TSS and FX revenue associated with TSS
customers who are FX customers of IB. However, some of the FX revenue associated with TSS
customers who are FX customers of IB is not included in TS and TSS firmwide revenue. These
amounts were $154 million and $196 million, for the three months ended September 30, 2009 and
2008, respectively, and $499 million and $609 million for the nine months ended September 30,
2009 and 2008, respectively.

Firmwide liability balances include liability balances recorded in Commercial Banking.

(d)

Reflects an internal reorganization for escrow products, from Worldwide Securities Services
to Treasury Services liability balances, of $13.9 billion and $20.3 billion for the three
months ended September 30, 2009 and 2008, respectively, and $15.6 billion and $21.2 billion
for the nine months ended September 30, 2009 and 2008, respectively.

(e)

Overhead ratios have been calculated based on firmwide revenue and TSS and TS expense,
respectively, including those allocated to certain other lines of business. FX revenue and
expense recorded in IB for TSS-related FX activity are not included in this ratio.

For a discussion of the business profile of AM, see pages 58-60 of JPMorgan Chases 2008 Annual
Report and on page 6 of this Form 10-Q.

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except ratios)

2009

2008

Change

2009

2008

Change

Revenue

Asset management, administration
and commissions

$

1,443

$

1,538

(6

)%

$

3,989

$

4,642

(14

)%

All other income

238

43

453

560

232

141

Noninterest revenue

1,681

1,581

6

4,549

4,874

(7

)

Net interest income

404

380

6

1,221

1,052

16

Total net revenue

2,085

1,961

6

5,770

5,926

(3

)

Provision for credit losses

38

20

90

130

53

145

Noninterest expense

Compensation expense

858

816

5

2,468

2,527

(2

)

Noncompensation expense

474

525

(10

)

1,478

1,496

(1

)

Amortization of intangibles

19

21

(10

)

57

62

(8

)

Total noninterest expense

1,351

1,362

(1

)

4,003

4,085

(2

)

Income before income tax expense

696

579

20

1,637

1,788

(8

)

Income tax expense

266

228

17

631

686

(8

)

Net income

$

430

$

351

23

$

1,006

$

1,102

(9

)

Revenue by client segment

Private Bank

$

639

$

631

1

$

1,862

$

1,935

(4

)

Institutional

534

486

10

1,481

1,448

2

Retail

471

399

18

1,135

1,355

(16

)

Private Wealth Management

339

352

(4

)

985

1,057

(7

)

Bear Stearns Private Client Services

102

93

10

307

131

134

Total net revenue

$

2,085

$

1,961

6

$

5,770

$

5,926

(3

)

Financial ratios

ROE

24

%

25

%

19

%

28

%

Overhead ratio

65

69

69

69

Pretax margin ratio(a)

33

30

28

30

(a)

Pretax margin represents income before income tax expense divided by total net revenue, which
is a measure of pretax performance and another basis by which management evaluates its
performance and that of its competitors.

Net income was $430 million, an increase of $79 million, or 23%, from the third quarter of 2008, as
higher net revenue and lower noninterest expense were offset partially by a higher provision for
credit losses.

Net revenue was $2.1 billion, an increase of $124 million, or 6%, from the prior year. Noninterest
revenue was $1.7 billion, an increase of $100 million, or 6%, due to gains on the Firms seed
capital investments and net inflows, largely offset by the effect of lower market levels and
decreased placement fees. Net interest income was $404 million, up by $24 million, or 6%, from the
prior year, due to wider loan spreads and higher deposit balances, largely offset by narrower
deposit spreads and lower loan balances.

Revenue from the Private Bank was $639 million, up 1%, from the prior year. Revenue from
Institutional was $534 million, up 10%. Revenue from Retail was $471 million, up 18%. Revenue from
Private Wealth Management was $339 million, down 4%. Revenue from Bear Stearns Private Client
Services was $102 million, up 10%.

The provision for credit losses was $38 million, an increase of $18 million from the prior year,
reflecting continued deterioration in the credit environment.

Noninterest expense was $1.4 billion, down by $11 million, or 1%, from the prior year. The decrease
was due to lower headcount-related expense, offset by higher performance-based compensation and
higher FDIC insurance premiums.

Year-to-date results

Net income was $1.0 billion, a decrease of $96 million, or 9%, from the prior year, due to lower
net revenue and a higher provision for credit losses offset partially by lower noninterest expense.

Net revenue was $5.8 billion, a decrease of $156 million, or 3%, from the prior year. Noninterest
revenue was $4.5 billion, a decrease of $325 million, or 7%, due to the effect of lower market
levels, lower placement fees and lower performance fees; these effects were offset predominantly by
gains on the Firms seed capital investments, the benefit from the Bear Stearns merger and net
inflows. Net interest income was $1.2 billion, up by $169 million, or 16%, from the prior year,
predominantly due to wider loan spreads and higher deposit balances, partially offset by lower loan
balances.

Revenue from the Private Bank was $1.9 billion, down 4%, from the prior year. Revenue from
Institutional was $1.5 billion, up 2%. Revenue from Retail was $1.1 billion, down 16%. Revenue from
Private Wealth Management was $985 million, down 7%. Bear Stearns Private Client Services
contributed $307 million to revenue.

The provision for credit losses was $130 million, an increase of $77 million from the prior year,
reflecting continued deterioration in the credit environment.

Noninterest expense was $4.0 billion, a decrease of $82 million, or 2%, from the prior year due to
lower headcount-related expense and lower performance-based compensation, offset predominantly by
the effect of the Bear Stearns merger and higher FDIC insurance premiums.

Assets under supervision were $1.7 trillion, an increase of $108 billion, or 7%, from the prior
year. Assets under management were $1.3 trillion, an increase of $106 billion, or 9%. The increases
were due to inflows in liquidity, fixed income and equity products, partially offset by the effect
of lower market levels and outflows in alternative products. Custody, brokerage, administration and
deposit balances were $411 billion, up by $2 billion, due to brokerage inflows in the Private Bank,
partially offset by the effect of lower market levels on custody and brokerage balances.

ASSETS UNDER SUPERVISION(a) (in billions)

As of September 30,

2009

2008

Assets by asset class

Liquidity

$

634

$

524

Fixed income

215

189

Equities & balanced

316

308

Alternatives

94

132

Total assets under management

1,259

1,153

Custody/brokerage/administration/deposits

411

409

Total assets under supervision

$

1,670

$

1,562

Assets by client segment

Institutional

$

737

$

653

Private Bank

180

194

Retail

256

223

Private Wealth Management

71

75

Bear Stearns Private Client Services

15

8

Total assets under management

$

1,259

$

1,153

Institutional

$

737

$

653

Private Bank

414

417

Retail

339

303

Private Wealth Management

131

134

Bear Stearns Private Client Services

49

55

Total assets under supervision

$

1,670

$

1,562

Assets by geographic region

U.S./Canada

$

862

$

785

International

397

368

Total assets under management

$

1,259

$

1,153

U.S./Canada

$

1,179

$

1,100

International

491

462

Total assets under supervision

$

1,670

$

1,562

Mutual fund assets by asset class

Liquidity

$

576

$

470

Fixed income

57

44

Equities

133

127

Alternatives

10

7

Total mutual fund assets

$

776

$

648

(a)

Excludes assets under management of American Century Companies, Inc., in which the Firm
retained 42% and 43% ownership at September 30, 2009 and 2008, respectively.

For a discussion of the business profile of Corporate/Private Equity, see pages 6163 of JPMorgan
Chases 2008 Annual Report.

Selected income statement data

Three months ended September 30,

Nine months ended September 30,

(in millions, except headcount)

2009

2008

Change

2009

2008

Change

Revenue

Principal transactions

$

1,109

$

(1,876

)

NM

$

859

$

(1,968

)

NM

Securities gains

181

440

(59

)%

761

1,138

(33

)%

All other income(a)

273

(275

)

NM

45

988

(95

)

Noninterest revenue

1,563

(1,711

)

NM

1,665

158

NM

Net interest income (expense)

1,031

(125

)

NM

2,885

(521

)

NM

Total net revenue

2,594

(1,836

)

NM

4,550

(363

)

NM

Provision for credit losses(b)

62

1,977

(97

)

71

2,014

(96

)

Noninterest expense

Compensation expense

768

652

18

2,064

1,902

9

Noncompensation expense(c)

875

563

55

2,539

1,168

117

Merger costs

103

96

7

451

251

80

Subtotal

1,746

1,311

33

5,054

3,321

52

Net expense allocated to other businesses

(1,243

)

(1,150

)

(8

)

(3,775

)

(3,277

)

(15

)

Total noninterest expense

503

161

212

1,279

44

NM

Income/(loss) before income tax expense
and extraordinary gain

2,029

(3,974

)

NM

3,200

(2,421

)

NM

Income tax expense/(benefit)

818

(1,613

)

NM

1,443

(852

)

NM

Income/(loss) before extraordinary gain

1,211

(2,361

)

NM

1,757

(1,569

)

NM

Extraordinary gain(d)

76

581

(87

)

76

581

(87

)

Net income/(loss)

$

1,287

$

(1,780

)

NM

$

1,833

$

(988

)

NM

Total net revenue

Private equity

$

172

$

(216

)

NM

$

(278

)

$

144

NM

Corporate

2,422

(1,620

)

NM

4,828

(507

)

NM

Total net revenue

$

2,594

$

(1,836

)

NM

$

4,550

$

(363

)

NM

Net income/(loss)

Private equity

$

88

$

(164

)

NM

$

(219

)

$

(8

)

NM

Corporate

1,269

(881

)

NM

2,514

295

NM

Merger-related items(e)

(70

)

(735

)

90

(462

)

(1,275

)

64

Total net income/(loss)

$

1,287

$

(1,780

)

NM

$

1,833

$

(988

)

NM

Headcount

20,747

24,967

(17

)

20,747

24,967

(17

)

(a)

Included $423 million representing the Firms share of Bear Stearns losses from April 8 to
May 30, 2008, in the second quarter of 2008, and proceeds of $1.5 billion from the sale of
Visa shares in its initial public offering in the first quarter of 2008.

(b)

2008 included an accounting conformity loan loss reserve provision related to the acquisition
of Washington Mutuals banking operations. For a further discussion, see Consumer Credit
Portfolio on page 103 of JPMorgan Chases 2008 Annual Report.

(c)

Second quarter of 2009 included an accrual of $675 million for an FDIC special assessment.
The first quarter of 2008 included a release of credit card litigation reserves.

JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion.
The fair value of the net assets acquired exceeded the purchase price, which resulted in
negative goodwill. In accordance with U.S. GAAP for business combinations, nonfinancial assets
that are not held-for-sale were written down against that negative goodwill. The negative
goodwill that remained after writing down nonfinancial assets was recognized as an
extraordinary gain. As a result of the final refinement of the purchase price allocation
during the third quarter of 2009, the Firm recognized a $76 million
increase in the extraordinary gain.

(e)

Included costs related to the Washington Mutual transaction, as well as items related to the
Bear Stearns merger.

Quarterly results

Net income was $1.3 billion, compared with a net loss of $1.8 billion in the third quarter of 2008.

Private Equity reported net income of $88 million, compared with a net loss of $164 million in the
prior year. Net revenue was $172 million, an increase of $388 million, reflecting Private Equity
gains of $155 million, compared with losses of $206 million in the prior year. Noninterest expense
was $34 million, a decrease of $7 million.

Net income for Corporate was $1.3 billion, compared with a net loss of $881 million in the prior
year. Net revenue was $2.4 billion, reflecting continued gains on trading positions and net
interest income.

Year-to-date results

Net income was $1.8 billion, compared with a loss of $988 million in the prior year.

Private Equity reported a net loss of $219 million, compared with a net loss of $8 million in the
prior year. Net revenue was negative $278 million, a decrease of $422 million, reflecting Private
Equity losses of $327 million, compared with gains of $203 million in the prior year. Noninterest
expense was $65 million, a decrease of $96 million.

Net income for Corporate was $2.5 billion, compared with $295 million in the prior year.
Current-year results reflected continued gains on trading positions,
net interest income driven by higher levels of investment
securities, and a
gain of $150 million (after-tax) from the sale of MasterCard shares, partially offset by a $419
million (after-tax) FDIC special assessment. Prior-year results included $955 million (after-tax)
proceeds from the sale of Visa shares in its initial public offering, partially offset by losses of
$642 million (after-tax) on preferred securities of Fannie Mae and Freddie Mac and a $248 million
(after-tax) charge related to the offer to repurchase auction-rate securities.

Merger-related items were a net loss of $462 million, compared with a loss of $1.3 billion in the
prior year. Bear Stearns net merger-related costs were $262 million, compared with $635 million.
The prior year included a net loss of $423 million, which represented JPMorgan Chases 49.4%
ownership in Bear Stearns losses from April 8 to May 30, 2008. Washington Mutual net
merger-related costs were $200 million, which included an extraordinary gain of $76 million,
compared with a loss of $640 million. The prior year included a charge of $1.2 billion (after-tax)
to conform loan loss reserves and an extraordinary gain of $581 million.